Financial inclusion and human development in Morocco: Long-run equilibrium, symmetric adjustment, and banking system implications

Imagine the economy of a country as a giant, bustling city. In this city, Human Development is the overall health and happiness of the people: how long they live, how well they are educated, and how much money they have to buy food and medicine. It's the scorecard for a good life. Now, imagine Financial Inclusion as the city's public transportation system and the network of shops. It's not just about having a bank account; it's about whether a regular person can actually use that account to save for a rainy day, borrow money to fix a broken roof, or pay for a child's school fees without getting crushed by debt.

For a long time, economists have wondered: Does building more banks and giving more people access to credit actually make people happier and healthier? Or do people just get bank accounts because they are already getting richer? It's a bit like asking: "Does buying a gym membership make you fit, or do fit people just buy gym memberships?" This question matters because if opening bank branches actually causes people to live better lives, then governments should build banks as a tool for social good, not just for profit. But if it's the other way around, then building banks might be a waste of time until the economy is already strong.

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The Story of Morocco's Bank and Its People

Two researchers, Brahim Barhoum and Hicham Ouakil, decided to investigate this mystery in Morocco. They didn't just look at a single year; they dug into 33 years of history, from 1991 to 2023. That's a long time to watch a story unfold, covering everything from the quiet early days of banking to the chaos of the 2008 global crisis and the pandemic.

The Big Discovery: A Slow-Motion Magic
The authors found that financial inclusion and human development in Morocco are indeed walking hand-in-hand, but they are walking at very different speeds. Think of it like planting a tree. When you plant a sapling (financial inclusion), you don't see a giant oak tree (human development) the next day. The tree grows slowly, quietly, and steadily over many years.

The study shows that while having access to banks helps people live better lives in the long run, it doesn't happen overnight. In the short term, the biggest thing that makes the "Human Development Index" (a score for health, education, and income) go up is simply having more money per person. Financial inclusion is the slow, steady fertilizer that helps the tree grow, but it takes a decade or more to see the full shade of the tree.

The "Symmetry" Surprise
One of the most interesting parts of the story is about how the system reacts to bad news. In some places, if the banking system crashes or stops lending, people's lives get ruined instantly, and it takes forever to recover. The researchers wondered if Morocco was like that. They used a special mathematical tool (called NARDL) to see if "bad banking days" hurt people more than "good banking days" helped them.

The answer was surprising: No. The effect is symmetrical. If banking access grows, people's lives improve slowly. If banking access shrinks a little, people's lives don't crash immediately. The gains from financial inclusion are like a savings account that is hard to drain quickly. The researchers found that temporary slowdowns in credit are unlikely to cause irreversible damage to human development. The "tree" is sturdy; a little wind won't knock it over.

The Bank's Own Health
The authors also looked at how this inclusion affects the banks themselves. They found a few fascinating things:

1. Less Risk: When banks lend to more diverse groups of people, their "bad debt" (loans that aren't paid back) actually goes down in the short term. It's like having a garden with many different types of flowers; if one gets sick, the whole garden doesn't die.
2. The "J-Curve" of Profit: When banks first start trying to include everyone, they spend a lot of money on training and new systems, so their profits dip. But the study shows that over the long haul, these banks actually become more profitable. It's a classic "spend money to make money" story, but it takes time to see the payoff.
3. Cheaper Loans: As the banking system gets deeper and more inclusive, the gap between the interest rate banks charge and the rate they pay on savings gets smaller. This means money becomes cheaper for everyone.

What the Study Rules Out
The researchers were very careful to say what this study doesn't prove.

• It's not a magic switch: They found no evidence that financial inclusion has an immediate, instant effect on human well-being. If you open a bank branch today, you won't see a jump in life expectancy next month.
• It's not a two-way street (yet): Many people assume that as people get richer and healthier, they naturally demand more banking services, creating a perfect loop. However, this study couldn't find strong statistical proof that human development causes financial inclusion in the short term. The feedback loop might exist, but it moves so slowly (over generations) that the data couldn't catch it.
• It's not a "win" for the banking system's safety: While inclusion helps in the short term, the study warns that if banks expand too fast without proper rules, they could get into trouble. The safety benefits aren't permanent; they need constant care.

The Bottom Line
The story of Morocco tells us that financial inclusion is a powerful tool for building a better society, but it is a marathon, not a sprint. It works, but it works slowly. The benefits are real and lasting, but they require patience. The banking system can handle the pressure of helping more people, and while it might stumble a bit at the start, it eventually becomes stronger and more efficient. For anyone hoping to improve lives, the lesson is clear: keep planting the seeds of financial access, but don't expect to harvest the fruit tomorrow.